We have noticed an upturn in requests for our technology clients to supply to parts of the world affected by international trade sanctions. This is a particularly thorny area, with detailed and fast-moving regulation affecting a wide range of technology-based products and services. Given the complexity and high levels of risk involved, many might decide to steer clear. Any supplier that does wish to go ahead will need to analyse the situation carefully first. We take a look at the principles underpinning the rules, taking trading with Iran as an example.
Technology companies have increasingly been asking us about sanctions regimes. In a world where international relationships with certain countries are softening, trade with those countries seems more accessible. In contrast, where relations are becoming more difficult sanctions can be quickly tightened up. Trading with Iran, for example, now seems to be on the rise, with an easing of EU sanctions in January 2014 following Iran’s moves to implement the November 2013 international agreement for a Joint Plan of Action. Meanwhile, relations with Russia and Ukraine are very much in flux at the moment, with tightening sanctions focused on particular individuals and organisations directly related to the Russian government.
The rules covering this area are detailed, and there is no “one stop list” of applicable trade sanctions. The analysis depends on the customer, the nature of the goods, the intended use of the goods and their destination. You may be surprised to see the wide range of products and services that can be caught by the regulations. There are detailed rules at UK and EU level, and suppliers with links to the United States (US operations, group companies or trading intermediaries, for example) will to need look at those rules as well. We do not address the US rules in this briefing, but note that they can be even more stringent than UK/EU sanctions and can have effect outside the US. On top of this, the rules change regularly as international relations shift and develop.
Taking as an example the trade sanctions applicable to Iran; what would you do if you were asked to supply a product to an Iranian customer, whether directly or via an intermediary of some kind? Where should you look to find applicable UK and EU sanctions rules?
At an EU level, sanctions and restrictions against trading with Iran are particularly targeted at preventing the development of its nuclear and ballistic missile programmes and potential human rights abuses, but the rules reach considerably further than you might at first think. Careful checking is necessary before beginning any supply of goods, services or digital material.
The EU’s “Regulation 267” imposes restrictions on a wide range of trading activities with Iran, including:
- Goods or technology related to nuclear or missile development.
- Equipment and technology relating to the oil and gas sector.
- Naval equipment and technology.
- Graphite and raw and semi-finished metals.
- Gold, precious metals and diamonds. (This prohibition has been temporarily lifted but, as things stand, is set to be reintroduced on 24 November 2014).
The “Dual Use Regulation” restricts the export of an extensive list of “dual use goods”. If these do not fall within the prohibitions of Regulation 267, then a licence will be needed for their export. The lists of dual use items are detailed and encompass many different technologies, including such diverse areas such as navigational systems, marine equipment, materials such as specified alloys, polymers and ceramics and human and animal pathogens.
Other regulations impose restrictions to combat the export of items that could be used for internal repression in Iran. This covers, for example, equipment and services that could be used for telephone or internet monitoring.
The UK government does not encourage trade or investment with Iran, so there is no Foreign Office or BIS support available. There are no UK embassy or consular facilities in Iran. But as long as an exporter complies with all applicable restrictive measures they are free to trade at their own risk. Three UK government bodies are involved in the application of sanctions.
- The Export Control Organisation (part of BIS) regulates the export of “strategic goods” (military technology, “dual-use” items etc.).
- HM Treasury regulates financial sanctions.
- The Foreign & Commonwealth Office regulates other trade sanctions and publishes a list of current country sanctions.
If you are actively monitoring sanctions developments, you can keep up to date with changes by subscribing to the Export Control Organisation's Notices to Exporters.
In addition to the EU-wide restrictions above, the UK has its own specific (and detailed) restrictions on trading with Iran. In summary these are:
The UK Military List
The UK has supported the international arms embargo in place on Iran since March 1993. This embargo is a ban on the export or supply of “arms and related material”’. The UK interprets the arms embargo as covering all goods and items on the UK Military List. This forms part of the wider UK Strategic Export Control List.
UK Strategic Export Control Lists
The UK Strategic Export Control Lists form the basis of determining whether any goods or technology intended for export is “controlled” and requires an export licence. It covers a wide range of items that could be used for military, torture or for weapons development purposes. If an item intended for export is listed under a Control List entry or “rating” then a licence is required. The Control Lists are drawn from several separate pieces of legislation, including the EU Dual-Use Regulation discussed above.
Even for goods not listed in a Control List, the UK Government has the power to impose “End-Use Controls” if there is any specific concern about military or WMD end-use.
The Iran List
The "Iran List" is a listing of organisations within Iran of potential concern to the UK Government. Where an exporter wishes to export to, or is contacted by, any of the listed organisations it should contact the Export Control Organisation for specific advice.
As you will see, this is a detailed and complex area of law. If you are asked to supply to a customer in a country that might be affected by sanctions, then you will need to analyse the situation carefully. This requires a detailed review of the relevant lists to check whether the products or service you intend to export, or the end customer, are caught. Before venturing into this thorny area, you should weigh up whether the amount of trade you are likely to gain will justify the required degree of analysis and monitoring. And if you decide that it is worth pursuing you will need to ensure you are well aware of the risks.